Federal agents are conducting a criminal investigation into whether McDonnell Douglas officials violated federal procurement regulations in the purchase of multimillion-dollar tools for the Air Force's C-17 cargo jet program, according to industry sources and government officials. The FBI is examining McDonnell contracts issued to Jedav Industries Inc.

Boeing Co. predicted Thursday that the Air Force would order as many as 14 more C-17 transport jets, extending the plane's production. Boeing is funding parts purchases at its own expense in anticipation that the Air Force will add more C-17s to its 190-plane order. The Chicago-based company has delivered 170 aircraft already and may shut down production in Long Beach if additional orders don't come in.

In a move affecting the Southern California defense industry, Defense Secretary Dick Cheney has proposed cutting production of the Air Force's C-17 airlift plane from 10 aircraft to six next year, defense sources said Tuesday. The decision, if approved by the White House and Congress, would be a blow to Douglas Aircraft's plan to boost its 8,000-member Long Beach work force for the stepped-up production that had been planned earlier.

Southern California's last major airplane factory got a reprieve Tuesday as Boeing Co. announced it would keep open its Long Beach production line for the C-17 Air Force transport for at least six more months. With no new orders, the sprawling plant next to Long Beach Airport had been scheduled for closure by mid-2009 with the rollout of the last C-17. It would have dealt a major economic blow to the region.

The Pentagon has suspended contract payments to McDonnell Douglas Corp. on the $30-billion C-17 cargo jet program and has begun a major evaluation of the financial condition of the firm's Douglas Aircraft unit in Long Beach, the Air Force disclosed Wednesday. The suspension began in August, but the Air Force did not disclose how much is being withheld.

A study by Rand Corp. has raised serious questions about the ability of the C-17 cargo jet to make repeated landings at many unimproved runways overseas, saying the plane could create large craters in the airports' concrete. But Air Force officials dismissed the report in congressional testimony Tuesday as a superficial analysis.

More than half of the tools built by McDonnell Douglas for production of C-17 cargo jets were found to be faulty after Air Force officials ordered a special sample inspection last year, it was learned Thursday. Air Force officials ordered the inspection after they discovered that quality assurance records for the C-17 tools had been altered, according to an Air Force statement issued Thursday in response to an inquiry by The Times.

Pentagon audits have concluded that McDonnell Douglas Corp. and General Dynamics Corp., the nation's two largest defense firms, have fallen into "weak" financial condition; each was rated by one analytical measure as having a "possible chance for bankruptcy."

The estimated weight of the Air Force C-17 cargo aircraft under development at McDonnell Douglas has increased by 8.2% over original plans, resulting in the aircraft not meeting one of its contractual performance requirements set by the Pentagon. But the weight growth, which has been an ongoing concern in the C-17 development, has not forced the program into a financial overrun on its fixed-price contract, according to Douglas C-17 general manager Robert L. Clepper.

Senior Pentagon management officials plan to recommend that the United States proceed with production of the B-2 Stealth bomber and the C-17 transport aircraft and continue work on two futuristic fighter-bomber aircraft, defense officials said Monday. At the same time, however, they are expected to offer Defense Secretary Dick Cheney options for trimming the B-2 and C-17 program in light of pressure to respond to changes in the East Bloc and new fiscal constraints.

Boeing Co. said Friday that it had resumed early steps toward shutting the production line for its C-17 Air Force transport plane in Long Beach because of a lack of new orders. In a repeat of last summer, Boeing said it had begun telling suppliers to stop producing parts for the C-17, the last of which would roll out of the Long Beach factory in mid-2009 unless further orders were placed for the four-engine jet. It takes about 34 months from the production of the first part to final assembly.

A congressional plan to add $2.1 billion to the defense budget to buy 10 more C-17 transport planes could help extend the life of the aircraft's production line in Long Beach beyond 2010, Boeing Co.'s top defense executive said. The funding could provide Boeing with a much-needed reprieve from having to shut the line sooner, James Albaugh, president of Boeing's Integrated Defense Systems unit, said in an interview Friday.

A federal audit agency said Wednesday that a Pentagon study used to justify shuttering the C-17 aircraft line in Long Beach was flawed and cautioned Congress about relying on the report to decide the cargo jet's fate. In a scathing analysis that could breathe new life into the program, the General Accountability Office said the results of the study were based on questionable assumptions and data that could not be verified.

Boeing Co. said Friday that it had taken the first steps toward closing its sprawling C-17 assembly plant in Long Beach, a shutdown that is expected to be completed by the middle of 2009 unless substantial new orders are placed for the giant military aircraft. Closing the plant, which employs about 5,500 workers, would deprive Long Beach of its largest private employer and deal a blow to hundreds of subcontractors in Southern California and around the nation that supply parts for the C-17.

Pentagon officials have begun the formal process to end Boeing Co.'s production of C-17 cargo jets in Long Beach by 2008, despite congressional lobbying to keep the assembly line open. In a classified Pentagon budget request last week, Deputy Defense Secretary Gordon England officially asked for $265 million in next year's budget to mothball the tools and machinery used to produce the four-engine cargo jets.

The Air Force doesn't want to expand its fleet of C-17 transport jets beyond the 180 it currently operates or has on order, Air Force Secretary Michael Wynne said Tuesday. The Air Force accepts the findings of a Defense Department review of military mobility that concluded the Air Force has adequate transport aircraft and the Navy has enough fast sealift vessels with the current planned inventory to deploy ground units in a timely manner, Wynne said.

McDonnell Douglas has suspended a high-level manager who was in charge of purchasing production equipment for the Air Force C-17 cargo jet program in Long Beach, the company acknowledged Wednesday. It declined to say what prompted its decision to suspend Spyros N. Papageorge. While he is not a defendant, Papageorge is one of the Douglas officials whose actions are described in a federal False Claims Act civil suit filed against McDonnell Douglas in U.S.

A cabal of Air Force generals and senior civilians used their influence and position to secretly bail out McDonnell Douglas in 1990 at a time when the firm appeared it might run out of cash, according to a Pentagon inspector general report issued Tuesday.

Boeing Co.'s campaign to keep open the C-17 production line in Long Beach got another shot in the arm Monday as an influential Pentagon panel called for buying more of the military cargo planes. In a 163-page report that examined the military's mobility needs, the Defense Science Board said the Air Force must have the option to buy more C-17s if the Pentagon wanted to meet its increased global requirements. It did not specify the number of planes needed.

The U.S. Senate took the first step Thursday to keep open the C-17 production line in Long Beach, calling for the Air Force to acquire enough of the cargo planes to keep the plant running until 2012. By an 89-8 vote, senators urged the Air Force to order 42 additional C-17s and provided a compromise that would allow the military to cut its acquisition rate from 16 planes a year to six.